Pay-per-Use Credit – How It Works and Benefits

How does a pay-per-use loan work?

In the case of a pay-per-use loan, the amount of the repayment and thus the monthly financial burden on the borrower depends on the output and utilization of the financed capital goods. Billing can be arranged according to quantity, operating hours or other output. About the so-called Internet of Things (IoT), the machine informs the lender, so the bank, independently on the parameters required to settle the loan.

Openness is needed

The principle of pay-per-use credit seems as simple as it is ingenious. However, it requires that the entrepreneurs look at the banks by the cards. If the bank can view the current production data in real time, it can draw conclusions about the business situation of its customer. While not every entrepreneur may be right, the number of companies that accept such a credit model is increasing.

The TU Darmstadt had carried out a survey on behalf of the company Creditshelf. The surprising finding was that 90 percent of the companies surveyed in this business model saw less of a risk than a chance to persuade banks to provide financing for an investment (1).

The European Family Business Barometer (EFBB) of the management consultancy and auditing firm KPMG shows that even more conservative family businesses are becoming more and more open to digitization (2). Family businesses are traditionally very cautious about passing on production information. On the other hand, the Internet of Things certainly offers opportunities to optimize liquidity in such a way that it also reveals data to the bank.

The Internet of Things, “Internet of Things” or IoT for short, makes the networking of investment and bank possible. IoT is the networking of objects among each other. Transferred to a private household Alexa controls the refrigerator temperature or the APP on the smartphone the domestic heater and displays their status permanently.

For whom is a pay-per-use loan suitable?

The target group for pay-per-use loans is clearly outlined. These are companies with cyclical orders or expanding companies. A manufacturer who has a continuous capacity utilization of his machines is also able to bear stable loan rates. The situation is different for companies that know exactly in which months of the year production is declining. This credit model is also suitable for companies that have to re-equip the machines occasionally due to different production runs and that there is a production stoppage.

Gomerszbank as a pioneer

Gomerszbank is the first bank to go this completely new way in asset financing. Together with the equipment manufacturer GAMEZ, it offers a pay-per-use loan whose repayment depends on the capacity utilization of the financed machine.

How does the pay-per-use loan at Gomerszbank work?

A company orders a production machine from the plant manufacturer GAMEZ. The plant is financed by Gomerszbank. The plant in turn sends the production data to Gomerszbank. From the utilization, the bank determines the amount of the monthly repayment (3).

In other words, the amount of the repayment and thus the monthly financial burden of the financing is based on the productivity of the financed investment. The monthly effort can drop to 50 percent of the originally agreed credit rate.

Although a reduced repayment performance extends the loan period, it keeps the liquidity in the company high. In the best case, the utilization is high enough to fully repay the loan within the agreed time.

If you offer leasing or use commercially, you usually have to work with a variety of different types of data. To process these, for example, in billing systems, they must be standardized. In addition, using your data can greatly improve your own offerings. However, storing, processing and transferring the data to a billing system is often limited.

The IT service provider PS-Team has therefore launched a solution with its platform solution banks labs to overcome these difficulties. Thus, the data transfer between manufacturers, leasing companies and credit institutions can be done without the problems of different data and forms of transmission. Difficulties from different systems on both sides are a thing of the past.

But how does that work?

The platform banks labs automatically reads the usage data. Subsequently, the information is also fully automatically checked, aggregated and prepared for leasing. The Director of Financial Institutions at PS-Team, Frank Schottheim, explains: “The various forms of transmission as well as data volumes and formats can be incorporated into the platform, where they are consolidated and structured, in order to finally offset usage- and consumption-based costs internally and externally, Both the lessor and his customer access a rate calculation that is geared exactly to the usage. “

There are no special interfaces for all parties to use the data. Without implementation costs, consumption-based costs can be charged internally and externally.

Further advantages are that manufacturers can draw conclusions about the use of their data from the data stored and processed. This, in turn, can be useful for the further development of your own offer. Another plus: the machine status can also be checked in real time via the banks labs platform.

Further information about PS-Team and the Pay-per-Use-Platform banks labs can be found here.